Internationnal remittances and the education of yuong generations the case of Vietnam

. \
UNIVERSITY
OF
ECONOMICS
INSTITUTE
OF
SOCIAL
STUDIES
HO
CHI
MINH
CITY
THEHUGUE
VIETNAM
THE
NETHERLANDS
VIETNAM-
THE
NETHERLANDS
PROJECT
OF
M.A ON
DEVELOPMENT
ECONOMICS
INTERNATIONAL
REMITTANCES
AND
THE
EDUCATION
OF
YOUNG GENERATIONS:

THE
CASE
OF
VIETNAM
A thesis submitted in
partial
fulfillment
of
the requirements for the degree
of
MASTER
OF
ARTS IN
DEVELOPMENT
ECONOMICS
BY
·
TRUONG
HQC
I<INH
TE
TP.HCM
NGUYEN
HAl
NGAN HA
TIIU
VIEN
•
Academic Supervisor: ) / 3 L
DR.

PETER
CALKINS
HO
CHI
MINH
CITY,
OCTOBER
2009
ACKNOWLEDGEMENT
I would like to express my sincere gratitude
to
my supervisor Prof. Peter
Calkins for his kind support
of
my Master study and research from initial
to
final
level, for his patience, enthusiasm, encouragement and immense knowledge. His
assistance has helped me a lot during the time
of
designing and writing this
research.
I am heartily thankful
to
Dr. Nguyen Trang Hoai, Dr. Nguyen Minh Due
and Dr. Tran Tien Khai for their comments and evaluation
of
my initial research
proposal.
I also send my gratefulness

to
Mr.
Truong Thanh Vu and Mr. Luong Vinh
Quae Duy who help me
to
deal with VHLSS 2006 dataset and Stata software.
Special thanks go to my friends for their support and motivation during
my
study at the Vietnam -Netherlands Program for M.A in Development Economics.
Last but not the least, I would like
to
thank my family: my parents for
giving birth
to
me, my parents-in-law,
my
husband and my older brother for
supporting me spiritually throughout
my
life.
Finally, I offer my regards and blessings
to
all
of
those who supported
me
in
any respect during the completion
of
the thesis.

CERTIFICATION
I certify that the substance
of
this thesis has not been submitted for any
degree and
is
not being current submitted for any other degree.
I certify that to the best
of
my knowledge, any help received in preparing
this thesis, and all sources used have been acknowledged in this thesis.
NGUYEN
HAl
NGAN
HA
Date: 23
October, 2009
ii
ABSTRACT
Over the last decades, Vietnam has experienced a sharp increase in
international remittances inflows from overseas migrants. The total volume
of
remittances accounts for approximately 6-8%
of
GDP. Many Vietnamese people
have migrated not only with the hope
of
getting more income and sending more
remittances
to

support their poor families in hometown, but also with the desire to
pay school fee for their young generations.
By lifting liquidity constraints, remittances raise the educational attainment
of
young people left behind in receipt countries. The impact
of
remittances on the
education
of
young generations has been studied
in
many papers. However, this
relationship has not been tested empirically in Vietnam. Therefore, the
contribution
of
this paper is to investigate empirical evidences on the link between
international remittances and probability
of
being enrolled
in
schools
of
young
individuals in Vietnamese households through exploring data
of
the Vietnam
Household Living
Standard Survey 2006
by
applying Logit econometric model.

Our results show that remittance receipts statistically significantly increase
the probability
of
school enrollment, particular for girls and in rural areas. In
addition, this research also finds that the young who have
to
work tend
to
gain
lower chances to go
to
schools than their friends without any job. Based on the
findings, the author suggests many ways
to
improve the school enrollment rate
of
young individuals. Methods aiming at stimulation
of
remittance income are
appropriate such
as
encouragement
of
labor exportation programs since Viet Kieu
has been getting older and less altruistic
as
well
as
lowering cross border money
transfer fees. Moreover, when reserved financial budget for young people

increases via the effect
of
attracting more remittance receipts, number
of
school
aged individuals participating
in
labor market at early ages tends
to
diminish
further.
iii
TABLE OF CONTENTS
CHAPTER
1:
INTRODUCTION 1
1.1.
PROBLEM
STATEMENT

1
1.2.
RESEARCH
OBJECTIVES

3
1.3.
RESEARCH
QUESTIONS

4
1.4.
RESEARCH
HYPOTHESES

4
1.5.
METHODOLOGY

4
1.6.
RESEARCH
SCOPE

5
1.7.
THESIS
STRUCTURE

6
CHAPTER
2:
LITERATURE REVIEW 7
2.1. INTRODUCTION

7
2.2. THE CONCEPT OF INTERNATIONAL MIGRANT REMITTANCES

7
2.3. THEORETICAL FRAMEWORK AND EMPIRICAL STUDIES RELATED TO THE

IMPACT OF INTERNATIONAL REMITTANCES
ON
THE EDUCATION

8
2.3
.1
Theoretical literature 8
2.3 .2. Empirical literature
13
2.4. THE ANALYTICAL FRAMEWORK

18
2.4.1. Empirical model
18
2.4.2. Variables introduction 20
2.5. SUMMARY

21
CHAPTER
3:
OVERVIEW OF INTERNATIONAL REMITTANCES AND
EDUCATIONAL ATTAINMENT OF THE YOUNG IN VIETNAM 22
3 .1. INTRODUCTION

22
3.2.
OVERVIEW OF INTERNATIONAL REMITTANCES
IN
VIETNAM

22
3.3.
OVERVIEW OF EDUCATION OF THE YOUNG
IN
VIETNAM

29
3.4.
SUMMARY

32
iv
CHAPTER
4:
METHODOLOGY 33
4.1. INTRODUCTION

33
4.2. DATA DESCRIPTION

33
4.2.1. Sampling method and sample size
33
4.2.2. Description
of
variables 34
4.2.3. Descriptive statistics
of
variables 36

4.3. STRENGTH AND WEAKNESS OF DATASET

39
4.4.
MODEL SPECIFICATION

40
4.5. ESTIMATION STRATEGY

43
CHAPTER
5:
EMPIRICAL ANALYSIS 45
5.1.
ESTIMATION RESULTS

45
5.2. INTERPRETATION OF THE RESULTS

45
CHAPTER
6:
CONCLUSIONS AND RECOMMENDATIONS
51
6.1. CONCLUSIONS

51
6.2. RECOMMENDATIONS

53

REFERENCES 55
APPENDICES
61
APPENDIX 1
61
APPENDIX 2
65
APPENDIX 3 70
v
LIST OF FIGURES
Figure 2.1 Home Investments
in
Young generations 9
Figure
3.1
Number
of
exported workers during 1992-2007
23
Figure 3.2 Percentage
of
Vietnamese migrant workers by countries 1992- 2006 24
Figure 3.3 Inward remittances from Vietnamese migrants during
2001-2009
25
Figure 3.4 Remittances as percentage
of
GDP during 1999-2008 26
Figure 3.5
Uses

of
international remittances(%) 28
Figure
4.1
Distribution
of
independent variable "remittances per capita"
65
Figure 4.2 Distribution
of
independent variable "logarithm
of
remittances per capita"

65
Figure 4.3 Distribution
of
independent variable "income excluding remittances per
capita" 66
Figure 4.4 Distribution
of
independent variable "logarithm
of
income excluding
remittances per
capita" 66
Figure 4.5 Distribution
of
independent variable "age
of

young generations" 67
Figure 4.6 Distribution
of
independent variable "percentage
of
school-aged children
in
the household" 67
Figure 4.7 Distribution
of
independent variable "age
of
household head" 68
Figure 4.8
Scatter plot
of
predicted value and standardized Peason residuals 74
Figure 4.9
Scatter plot
of
predicted value and deviance residuals 74
Figure
4.10 Scatter plot
of
predicted value and leverage
75
Figure
5.1
Predicted probability
of

school enrollment
by
remittances per capita 46
Figure 5.2
Predicted probabilities
of
school enrollment by remittances per capita and
urban-rural areas 48
Figure 5.3
Predicted probabilities
of
school enrollment by remittances per capita and
gender 49
Figure 5.4
Predicted probabilities
of
school enrollment by remittances per capita and
employment status
of
young generations
50
vi
LIST OF TABLES
Table
3.1
Flow
of
international remittances
by
origin(%) 26

Table 3.2
Percentage
of
households receiving international remittances 27
Table 3.3
Share
of
total remittances
in
urban and rural area 27
Table 3.4 Net enrollment rate
in
year 2006
by
urban rural areas and sex 29
Table 3.5 Average expense on education and training per person
in
the past
12
months
in
year 2006 by expense item, urban rural, sex, age group and type
of
school
31
Table
4.1
Investigated objects 34
Table 4.2 Descriptive statistics
of

independent variables 37
Table 4.3 Descriptive statistics
of
dependent variable "Enrollment status"
68
Table 4.4 School enrollment status
of
young generations
by
amount
of
international
remittances 38
Table 4.5
School enrollment status
of
young generations by age group 38
Table 4.6
School enrollment status
of
young generations by employment 39
Table
4.
7 Description and measurement
of
variables 40
Table 4.8 Logistic regression results
of
Model I (full) 70
Table 4.9 Logistic regression results

of
Model 2 (restricted)
70
Table 4.10 Diagnostic test to compare Model 1 and Model 2 70
Table 4.11 Hosmer and Lemeshow's goodness-of-fit test 70
Table 4.12 Diagnostic test for model specification error
71
Table 4.13 Diagnostic test for Multicollinearity 72
Table 4.14 Logistic regression results
of
Model 3 (after excluding influential
observations) 76
Table
5.1
Estimation results
of
Logit Model
45
Table 5.2 Marginal effects
of
explanatory variables on the probabilities
of
enrollment 76
vii
ECV
EHPM
EMP
ENIGH
ENROLL
FDI

GDP
GSO
HDI
HHAGE
HHEMP
HHGENDER
HHSCHOOL
IMF
INER
PC
LAMP-DR7
LFS
LN INER PC
LN RE PC
ACRONYMS
Encuesta Condiciones
de
Vida-
Quinta Ronda
Encuesta de Hogares de Prop6sitos
Multiples-
National
Household
Survey.
Employment status
of
young generations
Households Incomes and Expenditures National Survey
of
Institute

of
Statistics, Geography and Informatics
Enrollment status
ofyoung
generations
Foreign Direct Investment
Gross Domestic
Products
General Statistics Office
Human Development Index
Age
of
household head
Employment status
of
household head
Gender
of
household head
Number
of
completed school years
of
household head
International Monetary Fund
Income excluding remittances per capita
Latin American Migration Project-Dominican Republic
Survey
South
Africa Labor Force Survey

Logarithm
of
income excluding remittances per capita
Logarithm
of
remittances per capita
viii
ML Maximum Likelihood
MMP107 Mexican Migration Project
MOLISA
Ministry ofLabor-Invalids and Social Affairs
NLSS Nepal Living Standards Survey
ODA
Official Development Assistant
OECD Organization for Economic Cooperation and Development
PER SA CHILD Percentage
of
school-aged children in household
PSLSD Project for Statistics on Living Standards and Development
RE
PC
Remittances per capita
SBV State Bank ofVietnam
UNDP United Nations Development Program
USD
United States Dollar
VHLSS Vietnam Household Living Standard Survey
VND Vietnam Dong
WB
World Bank

ix
CHAPTER
1:
INTRODUCTION
This chapter will present the thesis topic that this study focuses on. The
problem statement will be discussed in section 1.1. Additional contents including
research objectives, questions, hypotheses and methodology are presented further
in section 1.2, 1.3, 1.4 and
1.5
respectively. Finally, research scope is mentioned
in section 1.6 and thesis structure will concludes this chapter.
1.1.
PROBLEM
STATEMENT
International migrant remittances play a crucial role in developing
countries. The huge and growing volume
of
international migrant remittances is
even larger than the
ODA amount flowing into developing countries. Most
of
the
remittance inflows come from overseas migrants with the purpose
of
family
support and investment in business or human capital. Remittances may
g1ve
significant impacts on households especially low-income families. Remittances
may help receipt households to establish or expand their small business (Woodruff
& Zenteno, 2007; Amuedo-Dorantes & Pozo, 2006) and to pay for medical

expenses (Amuedo-Dorantes et al.,
2007). In addition, remittance receipts are used
as an investment in the education
of
young generations in remittance receiving
families.
Vietnam was one
of
the top recipients
of
overseas migrant remittances
among developing countries in
2008 (WB, 2009). In 2007, average remittances per
person were
63
USD, compared with the average for OECD
of
108 USD.
Remittance amount accounted for approximately 8%
of
total GDP and 220%
of
net ODA receipts. The ratio
of
remittances to FDI was 0.8 (UNDP, 2009).
International remittance inflows reached 7.2 billion USD, accounting for about
6.4%
of
total GDP in 2008 (Nguyen, 2008). International remittance inflows come
from two main sources including temporary exported workers and permanent

migrants (Viet Kieu). While Viet Kieu has become older and less altruistic,
number
of
exported labors will be the main sources
of
international remittances in
future. Remittances are considered
as
person-to-person flows that are stable and
well targeted
to
the specific need
of
each individual recipient. In addition,
international remittances are not necessary
to
be
paid back since they seem to be
altruistic money transfers. For that reason, policymakers will need much more
empirical studies on the use
of
international remittance inflows since remittances,
in fact, positively contribute
to
communities and hometown nations
of
abroad
migrants.
A large number
of

Vietnamese households are currently living below the
poverty line mainly because
of
unemployment, low wage and low educational
level.
One
of
the ways for poor people gaining higher income
is
to migrate abroad
with the desire
to
send remittances back home for supporting their families and
offering more opportunities for their young children
to
go
to
school. During
1985
and 2007, the HDI
of
VietNam
increased by 1.16% yearly from 0.561
to
0.725.
Vietnam has a rank
of
116
111
out

of
182
countries with data
in
2007 (UNDP, 2009).
One
of
Vietnam's development goals
is
to
push up
its
recent low ranking on HDI.
by improving educational factor in international HDI scale. In Vietnam, education
programs are still costly and
of
low quality. Moreover, national public budget
is
not enough to support free or low cost education programs for young individuals.
Thus, remittance receipts seem
to
be one
of
substitute capital sources for public
educational investment rather than a complement.
Currently, there are a series
of
studies examining the impact
of
remittances

on the schooling
of
young generations in
El
Salvador (Edwards & Ureta, 2003;
Acosta, 2006), in Mexico (Hanson & Woodruff, 2003; Malone, 2007), in
Philippines (Yang, 2008), in Dominican Republic (Amueto-Dorantes et al., 2008)
and in Ecuador (Calero et al., 2008) and
so
on.
Those studies have found that
remittances significantly reduce the likelihood
of
quitting schools, increasing
children's years
of
schooling used
to
invest
in
their education path as well
as
pushing
up
the propmiion
of
school-aged children attending school. Through the
mechanism
of
diminishing liquidity constraints, amount

of
international
2
remittances probably encourages education investment and
to
some extent,
increasing financial budget spent on academic training for young people.
Until now, there
is
still
no
research on the impact
of
remittances on the
likelihood
of
school enrollment
of
young generations
in
Vietnam. Therefore, this
paper will explore whether remittances statistically significantly influence young
generations's schooling in VietNam. This paper will apply the Logit model using
Maximum Likelihood (ML) estimation method with data mainly taken from the
Vietnam Household Living Standard
Survey 2006 (VHLSS). The result
of
this
study
is

crucial for policymakers
to
produce policies
to
encourage human capital
investment while experiencing large out-migration and remittance inflows.
1.2. RESEARCH OBJECTIVES
The principal objective
of
this thesis
is
to
determine whether, how and to
what extent international remittances significantly affect the school enrollment
rate
of
young generations in specific types
of
Vietnamese households.
To meet this overall goal, the study will meet the following specific
objectives:
(i) To investigate whether international remittances significantly
influence the school enrollment status
of
young generations in
households in VietNam.
(ii) To consider whether there
is
differential impact
of

remittances on
educational outcomes
by
gender, urban-rural areas and employment
status ofyoung generations.
(iii) To make recommendations
to
government on the policies and
program that might best promote the effective use
of
remittances
in
human capital investment.
3
1.3. RESEARCH QUESTIONS
Based on the research objectives, this paper will mm to answer the
following questions.
1)
Do international remittances significantly affect the probability
of
school enrollment
of
young generations in Vietnamese households?
2) Are there significant differential impacts
of
remittance receipts on
school enrollment status by sex, urban-rural areas and employment
status
ofyoung
generations in remittance receiving households?

3) What policy recommendations could help the Vietnamese
government better channel international remittance inflows into
human capital formation for the sustainable long term growth
of
the
Vietnamese economy in the age
of
Knowledge Economy?
. 1.4.
RESEARCH HYPOTHESES
Based upon the results to these questions, the following research
hypotheses will be tested by using the Logit model
1) International remittances significantly
1m
prove the likelihood
of
attending schools
of
young generations in Vietnamese households.
2) The impact
of
international remittances on the schooling status
of
young generations differs by gender, urban-rural areas and
occupation status.
1.5.
METHODOLOGY
The research uses both qualitative and quantitative methods to evaluate the
impact
of

international remittance income on the enrollment status
of
young
generations in households. Qualitative analysis suppmis evidences on the right
selection
of
determinants affecting the education attainment
of
young generations.
Moreover, the Logit model
is
applied to investigate the significance and
magnitude
of
the effect
of
each input factor on the improvement
of
young
4
individuals' school enrollment rates. Upon the analytical results, suitable policies
will be suggested and discussed further.
Cross section dataset from Vietnam Household Living Standard Survey
2006 (VHLSS) will be used for this research. All information
of
the VHLSS was
collected by two times in the year
of
2006 and by methods
of

direct interview with
the heads households
& key commune officials. Main data used to run the
regression model are extracted from the Section 1
"List
of
household members",
Section 2 "Education" and Section 4 "Income" stated
in
the VHLSS dataset
of
9,189 households surveyed.
1.6.
RESEARCH
SCOPE
In order to identify the impact
of
migrant international remittances on the
probability
of
attending schools
of
young generations, we only focus on
individuals ranging from the age
of
6
to
20.
Each individual
is

treated as one unit
of
analysis instead
of
one household. This research will not choose a household
as
one unit
of
analysis because
of
two reasons. First, this method will not allow the
author
to
examine effects
of
specific characteristics
of
an individual including age,
gender, job
of
each person. Second, due
to
limitation
of
VHLSS 2006 dataset,
exploration
of
the whole data at individual level will offer advantages
of
large

sample size enough to run Logit model by using ML estimation method.
This paper
. aims
to
study the impact
of
international remittances from
migrants on education status
of
young generations left behind
in
all provinces in
Vietnam.
It
is
difficult
to
focus on only one region
in
Vietnam because
of
limited
data on remittance receiving families
in
VHLSS 2006.
5
1.
7. THESIS STRUCTURE
The study consists
of

6 chapters. Beside the chapter
1,
the rest
of
this paper
includes 4 chapters
as
follows:
Chapter
2:
Literature review will
be
discussed
in
this chapter. One section
is
devoted for introducing the definition
of
international remittances.
In
addition,
theoretical frameworks relating
to
the motivation to remit, the microeconomic
effects
of
international migrant's remittances on the schooling
of
young
generations in destination households, determinants

of
young generations's
education attainment are also reviewed. And then the analytical framework will be
introduced with detailed variable descriptions.
Chapter
3:
An overview
of
international remittances and education status
of
young generations in Vietnam will be illustrated
in
this chapter.
Chapter
4:
Methodology applied
in
this paper
is
mentioned. This chapter
will firstly mention the background
of
VHLSS 2006 data, sampling method and
sample size. In addition,
it
is
necessary
to
evaluate the advantages and
disadvantages

of
VHLSS data
in
order
to
argue
its
representative and reliability.
Finally, the econometric model, estimation strategy are orderly presented.
Chapter
5:
Estimation analysis
is
explained
in
details
in
this chapter.
Chapter
6:
Conclusions and Recommendations are mentioned in this
chapter.
It
summarizes the finding results and raises some useful policy
recommendations.
6
CHAPTER
2:
LITERATURE REVIEW
2.1. INTRODUCTION

The main objective
of
this paper IS to investigate the influence
of
international remittance inflows on the status
of
school emollment
of
young
generations. Therefore, the concept
of
international remittances will be clearly
illustrated in section 2.2. Then, theoretical and empirical literature related to the
link between international remittances and education will be discussed in section
2.3. Moreover, section 2.4 will be devoted to introduce the suggested analytical
framework. Finally, section 2.5 will briefly summarize some main ideas found in
this chapter.
2.2. THE
CONCEPT
OF
INTERNATIONAL
MIGRANT
REMITTANCES
Appendix 5 on remittances
to
the "Balance
of
Payments and International
Investment Position
Manual", International Monetary Fund introduced the

economic concept
of
remittances as: "Remittances represent household income
from foreign economies arising mainly
fi'om the temporary or permanent
movement
of
people to those economies. Remittances include cash
and
non-cash
items that flow through formal channels, such as across electronic wire, or
through informal channels, such as money or goods carried across borders. They
largely consist
of
funds
and
non-cash items sent or given by individuals who have
migrated to a new economy and become residents there,
and
the net compensation
of
border, seasonal, or other short-term workers who are temporarily employed in
an economy in which they are not
resident." (IMF, 2008)
That Appendix also offered 3 different definitions
of
remittances as
follows:
(i) Personal remittance
is

considered as one kind
of
the household-to-
household transfer and the net earnings
of
nomesident workers.
7
(ii) Total remittances include personal remittances, social security and
pension remittance amounts.
(iii) Total remittances and transfers
to
nonprofit institutions serving
households include total remittances and donation amount from the
government or enterprises
to
a charitable organization abroad. And
then this charitable institution will use such remittance receipts
to
support families.
For the purpose
of
this research, remittances are "limited
to
personal
international remittances but not include social security, pension transfers or
transfers to nonprofit institutions serving households.
2.3.
THEORETICAL
FRAMEWORK
AND

EMPIRICAL
STUDIES RELATED
TO
THE
IMPACT
OF
INTERNATIONAL REMITTANCES ON
THE
EDUCATION
OF
YOUNG GENERATIONS
2.3.1
Theoreticalliterature
The
theory of family behavior
The process
of
children's education attainment has been viewed as one
of
the aspects
of
the theory
of
family behavior (Haveman & Wolfe, 1995). This
theory considers one household
as
a production unit
in
which parents (or head
of

household) will make important decisions on many fields such
as
generation
of
family economic resources and uses
of
those resources (investment or
consumption). Actions
of
parents will influence the attainment
of
young people
in
that family depending on the amount, the characteristics and the timing
of
the
distribution
of
above mentioned resources.
8
Figure 2.1 Home Investments
in
Young generations
Heredity
Parents' IQ }
Parents' education
Family income
Quality
of
Time Inputs

Quantity
of
Time Inputs
Quality
of
Goods Inputs
Quantity
of
Goods Inputs
Source: Leibowitz (1974)
Ability (lQ)
Final Schooling Level
Post-school
investment
Figure
2.1
shows that final schooling level
of
children is generated from
genetic characteristics transmitted by their parents, family income and home
investment in time and goods devoted
to
young generations. The framework above
can be illustrated in three equation follows
(1) Children's IQ or ability= F (Heredity, Home Investment)
(2) Children's Schooling= F (Children's Ability, Home Investment, Family
Income)
(3) Children's
Income=
F (Home Investment, Children's Schooling, Post-

school Investment, Children's ability, Family Income).
In this case, international remittances constitute a crucial part
of
total
family income. Inward remittances are considered
as
additional financial sources
to total family income that help
to
release liquidity constraints and allow extra
investment in education
of
young generations.
9
The theories related
to
motivation
to
remit
A series
of
studies have focused on exploring two aspects
of
remittances
including the motivation
of
foreign migrants
to
remit and the use
of

remittances in
destination countries.
Over the past two decades, several researches have done
to
explain and provide more evidences on the reason why international remittances
exist.
Firstly, one
of
the motives
of
international migrants
to
send money back
home
is
altruism or solidarity, the willingness
of
a migrant employee living abroad
to
remit money in order
to
support the family members
in
the same household in
home country (Lucas
& Stark, 1985). Thus, remittance flows create a close link
between international migrants and family member left behind
in
hometown.
Rapoport

& Docquier (2005) presented that the amount transferred
by
a migrant
increases when his income goes up and the degree
of
altruism
is
higher. In
contrast, he will send back home less
if
his relatives in the home country earn
more income or his degree
of
altruism
is
lower.
Second, another motive
to
remit
is
exchanging (Cox, 1987). Abroad
migrants transfer money to their relatives with the purpose
of
repayment
of
loans
utilized to finance investment
in
human capital or expenses arising
in

their
household.
The theories on how remittances are spent, especially used
in
educational investment
In addition to researches on remitting motivation, an increasing number
of
current studies have concentrated on the use
of
remittances at the micro level.
Remittance receiving households may use the money sent
by
their relatives living
outside
to
run or develop their small companies (Woodruff & Zenteno, 2007;
Amuedo Dorantes & Pozo, 2006) or
to
cover medical expenditures (Amuedo
Dorantes et al.,
2007). Remittances are not only spent on daily consumption, but
also are used for investment in human capital (Edwards
& Ureta, 2003). This
10
paper only focus
on
discussing a series
of
papers exploring the mechanisms by
which the migration and remittances influence the educational results

of
young
generations in family left behind.
First, international remittances will
rmse the educational attainment
of
children in receipt households through the mechanism
of
lifting liquidity
constraints (Ilahi,
2001; Edwards & Ureta, 2003; Hanson & Woodruff, 2003;
Borraz, 2005; Yang, 2005; Rapoport & Docquier, 2005; Calero et al., 2008). In
developing countries, the standard living in households is still very low.
Parents do
not have enough
money
to support the education fees
of
their children even
supported by small public budget
on
education. Attending school will impose an
additional cost and thus, lead to the substantial decrease in total income or
household consumption. In this case, internationally transferred money is a
considerable fraction
of
the total family's budget and may help loosen the liquidity
constraints. Rapoport and Docquier
(2005) mentioned the model
of

liquidity
constraint and human capital investment. The model consumed that in the first
period, people left behind earn little income and regularly receive a fraction
of
money saved by relatives living outside. Therefore, the next generation in
remittance receipt households obtains more opportunities to attend schools with
the condition that savings are not negative at the end
of
the first period. In the
second period, it assumed that migrants wished to return and living in their
original country, then send all savings back home.
Second, by studying liquidity constraint and human capital investment
theory, one would expect that remittances significantly have positive effects
on
education attainment
of
young generations in the households having overseas
migrating members. However, the above-mentioned positive impact seems to be
ambiguous because remittances may produce the so-called disruptive effect
of
household migration
on
the educational results
of
young generations in the event
that the household has one
or
more family members abroad (Hanson & Woodruff,
2003;
Rapopmi

& McKenzie, 2006; Amuedo-Dorantes & Pozo, 2006; Milligan &
11
Bohara, 2007).
If
households have a family member going overseas, for example
father, mother or older brother and
so
on, that may cause a negative effect on total
household production, as a result, the inflow
of
income may also decrease. Thus,
members left behind especially young boys may need to pick
up
the slack and
work harder than before in order
to
gain more wages. Therefore, the probability
of
higher educational level
of
those young
is
lower than that
of
children in no-
migration households.
Finally, negative effects
of
international remittances on the educational
attainment may arise

if
remittances from family members focus on facilitating the
migration
of
other people left behind. Kandel and Kao (200
1)
argued that
migrants' transfer money might produce negative or positive impacts on the
attainment
of
education
of
family members
in
the home country depending on the
benefits
of
the education in the host country. For instance, if education is actually
not valued in the host nation, the probability
of
migrants in the home country
using remitting resources to facilitate out-migration instead
of
investing
in
education in the home country becomes higher.
In order to describe the conceptual framework
of
relationship between
remittances and education investment,

it
is
important
to
investigate the
interrelationship between migration, remittances and human capital decisions.
Migration, remittances and human capital decisions are one part
of
the overall
household strategy, thus rarely made
by
an individual but within the whole family
(Brown,
2005). The link
of
three factors above
is
so
complicated and sophisticated
that one may get easily confused. At first, the correlation between remittances and
migration will be reviewed.
It
is
reasonable
to
argue that migration causes
remittances since remittances will never flow into host countries
if
migration does
not exist.

On another hand, the decision
to
migrate overseas mainly comes from
the desire to earn more income, and
is
influenced by remit motivation (remittances
probably cause migration). Similarly, the relationship
of
migration and human
capital investment also occurs like the former. While the schooling attainment
of
12
the young generation partly drives parents
to
migrate (human capital causes
migration), so too can migration opportunities influence the decision
of
investment
in human capital (migration causes human capital investment). Finally, there
is
also a tight relationship between remittances and investment
in
human capital.
Any investment including human capital investment need to be funded by
financial sources such
as
savings or credit
of
the households. People can not
implement investment in education

if
savings or credit sources are not available at
the time
of
making investment decisions. In this event, remittances can be a
considerable fraction
of
families' budget
to
finance human capital investment
strategy. The inflow
of
remittances will help eliminate the financial constraint
faced by households and make the decision
of
human capital investment become
real. Upon the relationship between remittances and human capital investment,
it
is
clear that the existence
of
remittances
is
a necessary condition but not a
sufficient condition for investment in human capital (Brown,
2005). This argument
is
rational in the case that remittance receiving households may not use the money
sent by their overseas relatives to cover education related expenditures but may
prefer

to
finance in other fields such
as
business establishment or new house
building.
2.3.2. Empirical literature
The previous empirical studies have found some important determinants
of
schooling attainment
of
young generations including families' characteristics
(household income, place
of
birth, parental schoolings, parents' occupation,
household size, gender
of
household head, and
so
on) and young individuals'
characteristics (age, gender, birth order, and
so
on)
Parents' education
is
one
of
the most important factors that determine the
schooling results
of
children

in
households. · Educational rates
of
parents and
grandparents significantly influence young generations's schooling attainment
(Lillard & Willis, 1994
).
The result was found
by
using data extracted from the
13
Second Malaysia Family Life Survey, which provided enough information on the
education
of
four generations within a family. Especially, the schooling
of
mother
significantly have larger impacts on schooling
of
children than that
of
the father in
Nicaragua (Behrman
& Wolfe, 1984).
In addition, parents' income and occupation also affect the final education
outcomes
of
children (Parish & Willis, 1993). This empirical study was conducted
in order to explain the completed education level
of

each child in one Taiwanese
household. The regression results showed that the background
of
an individual
is
very important
to
their schooling level. Children, who obtained higher education
level than others, born and growing
up
in
urban areas and had mother and father
originating from mainland, and living
in
families with parents
of
higher status
in
income, education and work.
Gender
of
household head also significantly influence the education
attainment
of
young generations. Previous studies have reported that female
headship in a family would lead
to
higher educational level
of
young generations

since mothers were more likely than fathers
to
spend money on education
expenditure
of
their young generations (Buchmann, 2000).
Young
individuals' characteristics including birth order, age and sex also
affected their education attainment. People born early would get less education
than those born late
in
Taiwan. The academic process
is
also different between
boys and girls. Boys usually get higher schooling level than girls in Taiwanese
urban areas (Parish & Willis, 1993).
There are still very few empirical studies analyzing the impact
of
international remittances on schooling. The complicated relationship between the
international remittance receipts and academic outcome
of
young generations
in
households
is
still unclear and inconsistent among related studies in recent years.
While many studies found out that remittance inflows did have significantly
positive effects on educational outcomes
of
children (Edwards & Ureta, 2003;

Acosta, 2006; Yao & Donald, 2007; Malone, 2007; Amueto-Dorantes et al., 2008;
14
Calero et al., 2008), others reported negative or unambiguous results (Borraz,
2005; Amueto-Dorantes & Pozo, 2006; Milligan & Bohara, 2007). That
inconsistence partly comes from different methodologies, dataset and research
places selected by each author.
Edwards and Ureta
(2003) conducted a nationally representative
households survey from El Salvador (1997 EHPM) in order
to
study the impact
of
remittances on school retention rates
of
young generations between 6 and 24 years
of
age. The study applied the Cox proportional hazard model with the purpose
to
investigate how two types
of
income, international remittances and other financial
sources in total family budget, affect the schooling
of
the young. This paper
presented the results that remittances have a much larger influence on the hazard
of
leaving school in both rural and urban areas than other kinds
of
income. The
effect

of
remittances on school attendance rates
in
poor areas was much larger
than this in rich provinces although parents obtained low education level. In urban
areas, the effect
of
remittances
is
10
times larger than the size
of
the impact
of
other financial sources. In rural areas, the effect
of
remittances is about 2.6 times
larger than the size
of
the impact
of
other kinds
of
income. Estimated results also
insisted that parental schooling
is
one important determinant that significantly
influences the probability
of
leaving school. Moreover, household's budget

constraint
is
proven being a key factor that determining the education level
of
young generations. However, one
of
the large disadvantages
of
Edwards and Ureta
(2003)
is
the methodological problem
of
failing
to
consider the potential sample
selection and endogeneity
of
remittance receipts.
By using a different model compared with Edwards and Ureta
(2003
),
Borraz (2005) tried
to
explore relationships between international remittances and
education ofyoung generations by multivariate regression model.
Y = + tR + + + e
15